By Wondwossen Mezlekia
According to online sources, Starbucks’ growth strategy for 2007 is three-dimensional - store expansion, product development, and Socially & Environmentally Responsible (SER) coffee purchasing. Starbucks CEO Jim Donald reportedly stressed, during the fourth-quarter conference call, that purchasing socially and environmentally friendly coffee is as important an initiative as the other two.
We will have to live and see whether Donald’s promises translate into practice but it is apparent, right from the onset, that the ongoing dispute between Starbucks and Ethiopian coffee farmers is a lead up to testing the strategy and Starbucks’ commitment to live up to its words.
Though none of the strategies are new, in my view, Social & Environmental Responsibility (SER) continues to be the pillar and a challenge for Starbucks as long as coffee is the core of the business because of the importance of sustainability of supply. Market data indicate that Starbucks stands out as a healthy retailer in terms of unit growth and product innovation.
In Fiscal Year 2006 ending October, the company has done very well in store unit expansion and product development. Last year, Starbucks opened 2,199 and now calling for 2,400 additional stores in 2007. Starbucks’ performance in product development is also strong as evidenced by increases of 7% same-store sales and 2% sales per transaction during the year just ended.
When it comes to the business of SER however, Starbucks shows little or no sign of budge, thus the nickname, magnet to critics.
Fair trade activists advocating for farmers’ equity and environmental protection, animal-rights activists and consumer groups opposing the use of genetically-engineered hormones, commonly known as rBGH, in cows to boost milk production, and labor rights groups pressuring the company to allow its employees organize in unions, are few of the networks that accuse Starbucks of acting against its touted SER. Most of them criticize the company for dragging its foot to their calls.
At times, reading through the company’s press releases targeting some of the critics’ demand leaves one with an impression as though the parties – Starbucks and the activists – understand SER differently.
Eventually, however, Starbucks responds to the activists’ calls though with a cost for the activists spent on educating and mobilizing the public to pinch the company at the bottom-line.
In response to a longstanding argument, for instance, on January 15, 2007 Starbucks announced that it had begun buying only milk products without bovine growth hormone in those areas. "This is something that our customers have requested," Starbucks spokesman Brandon Borrman said. "It is just making sure our suppliers can supply the amount of milk we need." But the action came after Starbucks was targeted in a campaign by the group critical of the use of the rGBH.
Another case in point is the debate over fair trade. Though the company wants to deflect criticisms by introducing its own version of purchasing practices, called Coffee and Farmer Equity (C.A.F.E.), fair trade activists are galvanizing support by educating consumers to look, in particular, for the black & white Fair Trade Certified™ label. Advocates of the fair trade movement reject Starbucks’ C.A.F.E. practices as lacking transparency, meaning the amount paid to the farmers is at Starbucks’ discretion. The company defends C.A.F.E. as being independently verified. Agreement between the groups and Starbucks on this issue is beyond sight.
Parity to its scale, Starbucks is also surrounded by enough of other controversies though those may not be directly related to social responsibility per se.
Starbucks is yet to recover after it lost a trademark dispute with South Korean company Elpreya that sells coffee called "Starpreya" in cups with a green concentric logo surrounding a woman's face. Stabucks is also going through a massive protest in China after a China TV personality led an online campaign to remove Starbucks from China's vast Forbidden City palace. These are all painful experiences and portraying Starbucks as something other than what the company aspires for.
If the disputes that have rocked the world abroad, though the news did not make it to the TV screens in North America, had such an impact, then the ones that drew protesters to the doorsteps of the coffee retail chains and shopping malls in Seattle would encourage Starbucks to live up to its words as promised in official declarations.
One such controversy with its roots deep in SER is that over Ethiopia's coffee trademark names. This dispute is one of the most publicized and continues to attract international and local media attention through Fiscal Year 2007, thus casting the darkest shadow over Starbucks’ integrity.
Ethiopia wants to achieve recognition for its trademark rights for the country’s world-known coffees Harar, Sidamo, and Yirgacheffe through voluntary acceptance and/or federal registrations. These coffees sell at a premium, commanding a considerably higher price at retail markets but the country earnings are limited to only 6%-10% of the retail price.
Coffee accounts for more than half of Ethiopia’s export earnings and close to 15 million people depend on this crop for their livelihoods. Following the global coffee crisis, Ethiopian farmers are uprooting their coffee trees replacing them with chat (a narcotic plant banned in the US and most European countries) because the latter fetches the minimal income needed for them to stay alive.
By protecting the patent rights for these fine coffees, Ethiopia aims at capturing a fair share of the “intangible” values they command in the market.
Shockingly, Starbucks refused to sign a Licensing Agreement acknowledging Ethiopia’s trademark rights let alone to support the coffee farmers’ efforts to secure a better market price for their gourmet coffees. By controlling the trademarks, Ethiopia will have an equitable bargaining power in the global coffee trade thereby securing millions of dollars in additional revenue otherwise captured by coffee importers and roasters.
If socially responsible business means anything to the coffee farmers, Starbucks’ opposition to Ethiopia’s trademark initiative, which will enable the farmers to earn more money per unit of land or pound of coffee, reveals the slave-master relationship that had unnoticeably developed in the coffee marketplace.
To give Starbucks the benefit of the remote doubt, let’s say the company didn’t get it; that Jim Donald’s proud statement, "I'm very pleased to report that we surpassed that goal and will continue our work in this area," in reference to Starbucks’ 2006 goals to purchase 150 million pounds of coffee through C.A.F.E. practices, represents the company’s misguided understanding of SER. That too won't serve an excuse because the fact that the poor farmers are shouldering the heavy burden of global injustice makes their demand a matter of rights.
Either way, Ethiopia’s trademark initiative happened to be a live test to the core of Starbucks’ growth strategies – Social and Environmental Responsibility.
According to online sources, Starbucks’ growth strategy for 2007 is three-dimensional - store expansion, product development, and Socially & Environmentally Responsible (SER) coffee purchasing. Starbucks CEO Jim Donald reportedly stressed, during the fourth-quarter conference call, that purchasing socially and environmentally friendly coffee is as important an initiative as the other two.
We will have to live and see whether Donald’s promises translate into practice but it is apparent, right from the onset, that the ongoing dispute between Starbucks and Ethiopian coffee farmers is a lead up to testing the strategy and Starbucks’ commitment to live up to its words.
Though none of the strategies are new, in my view, Social & Environmental Responsibility (SER) continues to be the pillar and a challenge for Starbucks as long as coffee is the core of the business because of the importance of sustainability of supply. Market data indicate that Starbucks stands out as a healthy retailer in terms of unit growth and product innovation.
In Fiscal Year 2006 ending October, the company has done very well in store unit expansion and product development. Last year, Starbucks opened 2,199 and now calling for 2,400 additional stores in 2007. Starbucks’ performance in product development is also strong as evidenced by increases of 7% same-store sales and 2% sales per transaction during the year just ended.
When it comes to the business of SER however, Starbucks shows little or no sign of budge, thus the nickname, magnet to critics.
Fair trade activists advocating for farmers’ equity and environmental protection, animal-rights activists and consumer groups opposing the use of genetically-engineered hormones, commonly known as rBGH, in cows to boost milk production, and labor rights groups pressuring the company to allow its employees organize in unions, are few of the networks that accuse Starbucks of acting against its touted SER. Most of them criticize the company for dragging its foot to their calls.
At times, reading through the company’s press releases targeting some of the critics’ demand leaves one with an impression as though the parties – Starbucks and the activists – understand SER differently.
Eventually, however, Starbucks responds to the activists’ calls though with a cost for the activists spent on educating and mobilizing the public to pinch the company at the bottom-line.
In response to a longstanding argument, for instance, on January 15, 2007 Starbucks announced that it had begun buying only milk products without bovine growth hormone in those areas. "This is something that our customers have requested," Starbucks spokesman Brandon Borrman said. "It is just making sure our suppliers can supply the amount of milk we need." But the action came after Starbucks was targeted in a campaign by the group critical of the use of the rGBH.
Another case in point is the debate over fair trade. Though the company wants to deflect criticisms by introducing its own version of purchasing practices, called Coffee and Farmer Equity (C.A.F.E.), fair trade activists are galvanizing support by educating consumers to look, in particular, for the black & white Fair Trade Certified™ label. Advocates of the fair trade movement reject Starbucks’ C.A.F.E. practices as lacking transparency, meaning the amount paid to the farmers is at Starbucks’ discretion. The company defends C.A.F.E. as being independently verified. Agreement between the groups and Starbucks on this issue is beyond sight.
Parity to its scale, Starbucks is also surrounded by enough of other controversies though those may not be directly related to social responsibility per se.
Starbucks is yet to recover after it lost a trademark dispute with South Korean company Elpreya that sells coffee called "Starpreya" in cups with a green concentric logo surrounding a woman's face. Stabucks is also going through a massive protest in China after a China TV personality led an online campaign to remove Starbucks from China's vast Forbidden City palace. These are all painful experiences and portraying Starbucks as something other than what the company aspires for.
If the disputes that have rocked the world abroad, though the news did not make it to the TV screens in North America, had such an impact, then the ones that drew protesters to the doorsteps of the coffee retail chains and shopping malls in Seattle would encourage Starbucks to live up to its words as promised in official declarations.
One such controversy with its roots deep in SER is that over Ethiopia's coffee trademark names. This dispute is one of the most publicized and continues to attract international and local media attention through Fiscal Year 2007, thus casting the darkest shadow over Starbucks’ integrity.
Ethiopia wants to achieve recognition for its trademark rights for the country’s world-known coffees Harar, Sidamo, and Yirgacheffe through voluntary acceptance and/or federal registrations. These coffees sell at a premium, commanding a considerably higher price at retail markets but the country earnings are limited to only 6%-10% of the retail price.
Coffee accounts for more than half of Ethiopia’s export earnings and close to 15 million people depend on this crop for their livelihoods. Following the global coffee crisis, Ethiopian farmers are uprooting their coffee trees replacing them with chat (a narcotic plant banned in the US and most European countries) because the latter fetches the minimal income needed for them to stay alive.
By protecting the patent rights for these fine coffees, Ethiopia aims at capturing a fair share of the “intangible” values they command in the market.
Shockingly, Starbucks refused to sign a Licensing Agreement acknowledging Ethiopia’s trademark rights let alone to support the coffee farmers’ efforts to secure a better market price for their gourmet coffees. By controlling the trademarks, Ethiopia will have an equitable bargaining power in the global coffee trade thereby securing millions of dollars in additional revenue otherwise captured by coffee importers and roasters.
If socially responsible business means anything to the coffee farmers, Starbucks’ opposition to Ethiopia’s trademark initiative, which will enable the farmers to earn more money per unit of land or pound of coffee, reveals the slave-master relationship that had unnoticeably developed in the coffee marketplace.
To give Starbucks the benefit of the remote doubt, let’s say the company didn’t get it; that Jim Donald’s proud statement, "I'm very pleased to report that we surpassed that goal and will continue our work in this area," in reference to Starbucks’ 2006 goals to purchase 150 million pounds of coffee through C.A.F.E. practices, represents the company’s misguided understanding of SER. That too won't serve an excuse because the fact that the poor farmers are shouldering the heavy burden of global injustice makes their demand a matter of rights.
Either way, Ethiopia’s trademark initiative happened to be a live test to the core of Starbucks’ growth strategies – Social and Environmental Responsibility.
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